Govt on wrong track for new growth path, say researchers

The government has not created the right climate to achieve the targets of the new growth path economic strategy, according to a study by the Bureau of Market Research (BMR) at Unisa released on Sunday.

“It became clear that the conditions created by government do not favour the achievement of the stated targets,” the BMR said in a a statement.

The new growth path (NGP) aims to increase economic growth to sustainable rates of between 6% and 7% a year in order to create five million jobs by 2020. This would reduce the unemployment rate to 15%.

Official unemployment in the second quarter of this year, according to Statistics South Africa, was 25.7%.

For higher economic growth to translate into more jobs, economic growth needed to be labour absorptive.

The researchers — Professor Carel van Aardt, Professor André Ligthelm and Johan van Tonder — looked at whether this would happen in South Africa.

They found that employment growth had been negative in five of the 10 years between 2001 and 2010, while only one year of negative economic growth occurred.

“Employment in especially the agricultural and mining sectors suffered, each registering seven negative employment growth years,” the BMR said.

They came to this finding through analysing the relationship between gross value added (GVA) — a measure of the value of goods and services produced in an area, industry or sector — and employment per sector.

The researchers also found a very weak relationship between GVA and employment creation in most of the sectors.

“This implies that factors other than economic growth have a major impact on both job creation and job destruction in South Africa,” the researchers said.

This could be due to employers favouring capital over labour in production.

“Higher economic growth, for example, of 7%, will thus not automatically translate into the creation of five million jobs,” the BMR said.

“Should this preference for capital persist, economic growth rates of more than 10% per year might be necessary to create the five million jobs.”

The researchers calculated a capital-to-work ratio to see whether the sectors the NGP was focusing on, would create jobs.

The NGP had identified utilities, transport and communication, construction, agriculture, mining, and manufacturing as sectors which could create jobs.

The researchers found a major shift away from workers to capital in all but one of the economic sectors.

“Interestingly, in all the sectors identified by the NGP to be or become labour absorptive, a preference for capital over labour has developed since 2000. In fact, only in the financial sector did the capital-worker ratio decrease.” – Sapa

Gillian Jones
Guest Author
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